On May 13, 2024, Chase CEO Jamie Dimon attended the seventh “Choose France Summit” held at the Palace of Versailles outside Paris, aiming to attract foreign investors to France.
Ludovic Marin | Reuters
JPMorgan Chase Executives said the bank would increase share buybacks to avoid further building up tens of billions of dollars in excess cash.
Just picked one off record year For profit, revenue, JPMorgan faces CFO problem Jeremy Barnum Acknowledging it’s a “high-level issue”: According to some estimates, the bank has about $35 billion in capital it doesn’t need to meet regulators’ requirements, or what analysts call “excess capital.”
“We don’t want to see excessive growth here,” Barnum told analysts on Wednesday. “Given the amount of organic capital generation that we’re generating, that means that — unless we find an opportunity in the near term, organically deployed or otherwise — —That means greater returns on capital through buybacks.”
The bank has heard from investors and analysts who want to know what JPMorgan plans to do with the cash. The largest U.S. banks by assets have been hoarding earnings to prepare for Basel 3 regulations that will require more capital, but Wall Street analysts now believe the incoming Trump administration may come up with some proposals milder.
Back in May, when the issue came up at his bank’s annual investor day, the CEO Jamie Dimon He bristled at the idea of expanding his purchase of the stock, which was trading near its 52-week high of $205.88.
“I want to do it It’s really clear, OK? We will not repurchase a large number of shares at these prices,” Dimon said at the time.
That’s because the company’s valuation is too high even in his own view, Dimon said: “Repurchasing a financial company’s stock for substantially more than twice its tangible book value is a mistake. We won’t do it.”
The bank’s stock has only begun to appreciate in value since then: A shares are now trading 22% higher than when Dimon made those comments.
In an effort to resist calls to cut its cash reserves more than it deems necessary, JPMorgan hinted at the following risks: turbulent times Front. Dimon and others have warned of the possibility of a looming recession since at least 2022, but it has not yet arrived and the end of the economic cycle remains far off.
Barnum returned to the topic on Wednesday, telling reporters that there is a “tension” between economic risks and high asset prices in the market; therefore, the bank must be prepared for “a variety of scenarios,” he said.
Portales Partners analyst Charles Peabody said a sharp economic downturn would give the bank the opportunity to deploy more of its estimated $35 billion in excess cash through loans.
“I think JPMorgan is going to be disciplined and not waste capital,” Peabody said. “The best time to capture market share is after a recession because your competitors are somewhat damaged. I expect he will start from Withdrawal of share buybacks at current levels despite pressure from shareholders for more action.”
